Saving for School Fees From Abroad: A Practical Guide for Expat Parents

School fees are one of the few big costs with a known date. That makes them easier to plan for than most, but only if you choose the right savings tool for the time you have. This guide shows how to work out what you need, how long you have and which route suits each timescale for expat parents.

This guide is general information, not personal advice. Fees, tax rules and products differ by country, so take regulated advice before you commit.

The short answer

• Start from the date you need the money, not from the product.
• The shorter the time, the less risk you should take and the more important it is to keep the money accessible.
• A long regular savings plan with early exit charges can be a poor fit if your plans may change.
• Fees are often in sterling while your income may be in another currency, so the exchange rate matters.

Step 1: Work out what you need

Planning begins with three numbers. Write them down before you look at any product.

1. The total cost. Include tuition, boarding if relevant, uniforms, trips, exam fees and travel. Ask the school for the current fee schedule, and allow for fees to rise each year.
2. When it is due. Fees are usually paid each term or year, so you may need the money in stages over several years rather than in one lump sum.
3. The currency. UK schools bill in sterling. International schools may bill in dollars, euros or a local currency.

If a sibling will follow, add their fees to the plan from the year they are due to start, as two sets of fees can overlap for several years.

Our page on school fee planning for expats gives the wider picture.

Step 2: Match the tool to the time you have

This is the part many plans get wrong. The time until you need the money should drive the choice.

• Under about three years. Keep the money in cash or very low-risk holdings. A fall in investment markets near the date you need to pay is hard to recover from.
• Three to seven years. A mix may suit some families, moving to lower-risk holdings as the date approaches.
• Seven years or more. You may be able to take more investment risk, because there is time to recover from a bad year. You still need to know what you would do if you needed the money early.

These bands are rules of thumb, not advice. Your risk tolerance, other assets and the cost of being short all matter.

The options

A regular savings plan

A plan can enforce discipline, but the charges are often heavy in the early years and leaving early can cost a large share of what you paid in. School fees may change if you move, if the child changes school or if your income changes. Read our guide to five questions to ask before you sign a regular savings plan and our explanation of early exit charges first.

A UK ISA, if you can still use one

You can generally pay into an ISA only while you are UK resident, though you may be able to keep an existing one. See whether expats can keep or use a UK ISA. The country where you live may tax it differently.

An offshore investment bond

A bond can let money grow with little tax inside it, and you can take withdrawals as fees fall due. Tax then depends on where you live and on the bond’s rules. Read offshore bond tax for UK expats before you decide, and see our page on offshore investment bonds.

A flexible investment account or cash savings

These are often simpler and easier to exit. Charges and tax differ, and not every provider will accept customers who live in certain countries. Compare the all-in cost, not only the headline rate.

Relatives and trusts

Grandparents sometimes help with fees. Gifts and trusts have inheritance tax and other consequences, so take advice before you set one up.

A worked example

This example is illustrative and uses invented round figures.

A couple expect to need £40,000 for senior school fees in six years. The first step is the arithmetic. Six years is 72 months, and £40,000 divided by 72 is about £556 a month. That is the amount they would need to save with no investment growth and no charges.

Growth could reduce the monthly figure, and charges or a poor year could raise it. Because the date is fixed and the time is only six years, they decide to keep the money flexible, move to lower-risk holdings in the last two years and avoid a long plan with heavy early exit charges. They also ask which currency the fees will be in, because a move in the exchange rate could change the sterling cost of the school bill.

Currency

If you earn in one currency and pay fees in another, the exchange rate can add or remove thousands from the cost. A few steps help:

• Know which currency the fees will be paid in.
• Consider holding some of the savings in that currency as the date gets close.
• Compare the all-in cost of converting, including the margin on the exchange rate.

Our guide to currency risk on expat savings goes into this in more detail.

If your plans change

Expat lives change. A new job, a move or a different school can alter the timetable. Ask these questions before you commit:

• Can I stop, reduce or pause payments without a penalty?
• What would I get back if I needed the money early?
• Will the provider still serve me if I move country?
• What happens to the savings if one parent can no longer work?

Protection matters too. If the main earner died or could not work, the fees would still be due. Our guide on how much life insurance expats need explains how to cover that risk.

How fees tend to rise

School fees at UK independent schools have typically risen faster than general inflation, so a budget based on today’s fee schedule will usually fall short. When you work out the total in Step 1, add an allowance for annual increases and check the school’s fee history for the last few years. If the school publishes fees only a year ahead, ask the bursar how much they have risen on average. Rebuild the figure once a year, because a small shortfall found early costs far less to close than one found in the final year.

Common mistakes

• Starting with a product before working out the amount and the date.
• Taking high investment risk when the fees are due in two or three years.
• Locking into a long plan that is costly to leave.
• Ignoring currency risk on fees paid in another currency.
• Forgetting that fees rise each year.
• Not insuring against the loss of the main income.

Related reading

For the overview, see our expat savings hub.

Frequently asked questions

How should expats save for school fees?

Start with the amount and the date, then choose a tool that matches the time you have. Short timescales call for low-risk, accessible savings.

Is a regular savings plan good for school fees?

It can enforce discipline but may carry heavy early charges, so it suits people who are sure they can keep paying for the whole term.

Can I use a UK ISA for school fees if I live abroad?

You can usually keep an existing ISA, but you generally cannot pay in once you are not UK resident. The country where you live may tax it.

How much should I save each month for school fees?

Divide the total you need by the number of months until it is due, then adjust for growth, charges and rising fees. For example, £40,000 over 72 months is about £556 a month before growth and charges.

Does currency affect school fee planning?

Yes. If your income and the fees are in different currencies, exchange rate moves can raise or lower the cost.

This article is for information only and is not financial advice. Products, charges and tax rules differ and can change. Take regulated advice before acting.